I settled an earlier year under Vivad se Vishwas. The CIT(A) is now using that settlement to sustain a disallowance in a later year. Can he?
No. The Explanation to section 5 of the Direct Tax Vivad se Vishwas Act, 2020 says in terms that making a declaration shall not amount to conceding the tax position, and that it is not lawful for the income-tax authority or the declarant to contend that either has acquiesced in the decision on the disputed issue by settling the dispute. The Tribunal held the CIT(A) could not impute the surrender made under the 2020 Act and sustain a disallowance of interest that was not itself part of the settlement, and allowed the appeals.
Decided by the ITAT (N.K. Billaiya AM and Kul Bharat JM, ITAT Delhi Bench 'C') on 2022-11-24, reported as Direct Tax Vivad se Vishwas Act, 2020; ITA Nos. 986, 987, 988 and 989/Del/2021 (ITAT Delhi), AYs 2011-12, 2012-13, 2014-15 and 2015-16. It bears on section DTVSV 2020 of the Income Tax Act 1961, in Appeals and How Tax Law Is Read matters.
This is the practical answer to the commonest post-settlement problem. A settlement made to buy peace in one year is routinely thrown back at the assessee in the next, and the Explanation to section 5 is the complete answer — reinforced by CBDT's own answer to Question No.52, reproduced by the Tribunal: only the issues covered in the declaration are settled, without prejudice to the same issues pending in other cases. The point cuts both ways, which is what makes it robust: the Explanation binds the declarant as much as the authority, so an assessee cannot use a settled year against the Revenue either. Note the specific shape of the argument here — the loans had been accepted as genuine in the earlier year, the settlement swept in the whole amount including those loans, and the department then treated the settlement as an admission that the loans were bogus, which would have destroyed the interest deduction in the later year. The equivalent provision in the 2024 Scheme is section 92(4), on which see ACIT v Antilia Venture Capital.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
Read aloud by your device. Press again to stop.
Unsecured loans taken from Agarwal Alloys Steel Pvt. Ltd. had been accepted as genuine and explained in the assessment for AY 2009-10. In the years under appeal the assessee claimed a deduction for the interest referable to those loans. Under the 2020 Act the assessee had to settle the dispute in respect of the entire amount, and the settlement therefore swept in the impugned loans whose genuineness had already been accepted in the earlier assessment year. The CIT(A) treated that settlement as a surrender and on that footing sustained the disallowance of the interest, although the interest disallowance was not itself part of what had been settled.
The captioned appeals were allowed (para 14) and the Assessing Officer was directed to delete the impugned disallowances of interest for the captioned assessment years (para 13). The CIT(A) could not impute the surrender made under the 2020 Act and on that basis sustain a disallowance of interest which was not part of the settlement of the dispute under that Act (para 12). The loans had been accepted as genuine in the earlier assessment year and the settlement swept them in only because the whole amount had to be settled, so the settlement could not be treated as displacing that acceptance (para 10).
The Tribunal recorded that the CIT(A) had been carried away by the assessee's decision to avail the 2020 Act scheme and had disallowed the interest claim on that footing (para 8), and set out the CIT(A)'s own finding, at his para 8.7, that the loan taken in AY 2009-10 had been considered genuine and explained in that year's assessment so that the interest component relating to it should be allowed (para 9). It then found that the loans in question were taken in an earlier year in which they had been accepted as genuine, and that the settlement under the 2020 Act had necessarily covered the entire amount including those loans; in the same paragraph it set out the Explanation to s.5 of the 2020 Act, which clarifies that making a declaration shall not amount to conceding the tax position and that it shall not be lawful for the income-tax authority or the declarant, being a party in appeal, writ or SLP, to contend that either has acquiesced in the decision on the disputed issue by settling the dispute (para 10). It added the answer to Question No.52, that only the issues covered in the declaration are settled and without prejudice to the same issues pending in other cases, which the order attributes to "Circular No.7 dated 04.03.2020" (para 11). On that footing the settlement could not be converted into a concession supporting a disallowance in another year (para 12), and the Assessing Officer was directed to delete the disallowances (para 13).
In the light of the above, in our considered opinion the CIT(A) could not have imputed the surrender under the VSV Act, 2020 and sustained the impugned disallowance of interest which was not part of the settlement of dispute under the VSV Act, 2020.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppNo. The Explanation to section 5 of the Direct Tax Vivad se Vishwas Act, 2020 says in terms that making a declaration shall not amount to conceding the tax position, and that it is not lawful for the income-tax authority or the declarant to contend that either has acquiesced in the decision on the disputed issue by settling the dispute. The Tribunal held the CIT(A) could not impute the surrender made under the 2020 Act and sustain a disallowance of interest that was not itself part of the settlement, and allowed the appeals. This was decided by the ITAT (N.K. Billaiya AM and Kul Bharat JM, ITAT Delhi Bench 'C') and bears on section DTVSV 2020 of the Income Tax Act 1961. It is reported as Direct Tax Vivad se Vishwas Act, 2020; ITA Nos. 986, 987, 988 and 989/Del/2021 (ITAT Delhi), AYs 2011-12, 2012-13, 2014-15 and 2015-16. This is the practical answer to the commonest post-settlement problem. A settlement made to buy peace in one year is routinely thrown back at the assessee in the next, and the Explanation to section 5 is the complete answer — reinforced by CBDT's own answer to Question No.52, reproduced by the Tribunal: only the issues covered in the declaration are settled, without prejudice to the same issues pending in other cases. The point cuts both ways, which is what makes it robust: the Explanation binds the declarant as much as the authority, so an assessee cannot use a settled year against the Revenue either. Note the specific shape of the argument here — the loans had been accepted as genuine in the earlier year, the settlement swept in the whole amount including those loans, and the department then treated the settlement as an admission that the loans were bogus, which would have destroyed the interest deduction in the later year. The equivalent provision in the 2024 Scheme is section 92(4), on which see ACIT v Antilia Venture Capital. If it applies to you, the first step is this: Identify precisely which issues and which amounts were covered by the declaration; the Explanation protects only against inference, so the year and the issue actually settled must be separated from everything else.
Unsecured loans taken from Agarwal Alloys Steel Pvt. Ltd. had been accepted as genuine and explained in the assessment for AY 2009-10. In the years under appeal the assessee claimed a deduction for the interest referable to those loans. Under the 2020 Act the assessee had to settle the dispute in respect of the entire amount, and the settlement therefore swept in the impugned loans whose genuineness had already been accepted in the earlier assessment year. The CIT(A) treated that settlement as a surrender and on that footing sustained the disallowance of the interest, although the interest disallowance was not itself part of what had been settled. The matter was decided on 2022-11-24 by the ITAT (N.K. Billaiya AM and Kul Bharat JM, ITAT Delhi Bench 'C'). On those facts the ITAT held as follows. The captioned appeals were allowed (para 14) and the Assessing Officer was directed to delete the impugned disallowances of interest for the captioned assessment years (para 13). The CIT(A) could not impute the surrender made under the 2020 Act and on that basis sustain a disallowance of interest which was not part of the settlement of the dispute under that Act (para 12). The loans had been accepted as genuine in the earlier assessment year and the settlement swept them in only because the whole amount had to be settled, so the settlement could not be treated as displacing that acceptance (para 10).
The Tribunal recorded that the CIT(A) had been carried away by the assessee's decision to avail the 2020 Act scheme and had disallowed the interest claim on that footing (para 8), and set out the CIT(A)'s own finding, at his para 8.7, that the loan taken in AY 2009-10 had been considered genuine and explained in that year's assessment so that the interest component relating to it should be allowed (para 9). It then found that the loans in question were taken in an earlier year in which they had been accepted as genuine, and that the settlement under the 2020 Act had necessarily covered the entire amount including those loans; in the same paragraph it set out the Explanation to s.5 of the 2020 Act, which clarifies that making a declaration shall not amount to conceding the tax position and that it shall not be lawful for the income-tax authority or the declarant, being a party in appeal, writ or SLP, to contend that either has acquiesced in the decision on the disputed issue by settling the dispute (para 10). It added the answer to Question No.52, that only the issues covered in the declaration are settled and without prejudice to the same issues pending in other cases, which the order attributes to "Circular No.7 dated 04.03.2020" (para 11). On that footing the settlement could not be converted into a concession supporting a disallowance in another year (para 12), and the Assessing Officer was directed to delete the disallowances (para 13). In the words reproduced by the source cited on this page: "In the light of the above, in our considered opinion the CIT(A) could not have imputed the surrender under the VSV Act, 2020 and sustained the impugned disallowance of interest which was not part of the settlement of dispute under the VSV Act, 2020."
It was decided by the ITAT on 2022-11-24 and is reported as Direct Tax Vivad se Vishwas Act, 2020; ITA Nos. 986, 987, 988 and 989/Del/2021 (ITAT Delhi), AYs 2011-12, 2012-13, 2014-15 and 2015-16. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section DTVSV 2020, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The captioned appeals were allowed (para 14) and the Assessing Officer was directed to delete the impugned disallowances of interest for the captioned assessment years (para 13). The CIT(A) could not impute the surrender made under the 2020 Act and on that basis sustain a disallowance of interest which was not part of the settlement of the dispute under that Act (para 12). The loans had been accepted as genuine in the earlier assessment year and the settlement swept them in only because the whole amount had to be settled, so the settlement could not be treated as displacing that acceptance (para 10). It arises in Appeals and How Tax Law Is Read matters, on section DTVSV 2020 of the Income Tax Act 1961, and was decided by N.K. Billaiya AM and Kul Bharat JM, ITAT Delhi Bench 'C'. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put the Explanation to s.5 and CBDT's answer to Question No.52 on record together — the Tribunal relied on both; check the circular reference before citing it, because this order attributes that answer to Circular No.7 dated 4 March 2020 while Circular 4/2021 records FAQs 1 to 55 as issued by Circular 9/2020 dated 22 April 2020. Where the later-year disallowance is consequential, as an interest deduction is consequential on the genuineness of the loan, show that the consequential item was never part of the settlement. Do not rest on the settlement as positive proof in your own favour either; the Explanation disables both sides equally, and the Revenue will invoke it. In a running matter, record in the Form 1 covering letter which issues are being settled and for which year, so that the boundary is documented before the dispute arises.
Validity check could not be completed. Validity check could not be completed. No later treatment was searched for or located, and only part of the order was read. The proposition it applies is statutory and is applied to the same effect by the ITAT Delhi in Bain & Company Inc., USA v. Dy./ACIT, ITA No.1105/Del/2025 (AY 2022-23), decided 18 February 2026, and by the ITAT Chennai in ACIT v. Antilia Venture Capital, both read this pass. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Only part of this order could be transcribed: the paragraphs mentioning Vivad se Vishwas (8, 10, 11 and 12) and the disposal at para 14. The full facts, the assessment sections involved and the amounts were NOT read, and the account below is confined to what those paragraphs say; the last numbered paragraph is 14. Para 10 contains an internal contradiction in the original — 'the impugned unsecured loans were taken in A.Y. 2010-11 i.e. A.Y. 2009-10'. The Explanation to s.5 as reproduced by the Tribunal at para 10 reads 'being a part in appeal or writ or in SLP', which matches CBDT's FAQ text rather than the Act; the Act's own words, as reproduced in the Kerala High Court's judgment in ACIT v Satwashil Vasant Mane and the Patna High Court's in Manohar Lal Poddar, both read this pass, are 'being a party in appeal or writ petition or special leave petition'. Take the statutory wording from those judgments, not from this order. Para 11 is a quotation of FAQ 52 and no locator has been taken from inside it. Para 11 attributes the answer to Question No.52 to "Circular No.7 dated 04.03.2020". Circular 4/2021, reproduced in full at para 34 of Bhupendra Harilal Mehta and read this pass, records that the FAQs numbered 1 to 55 were issued by Circular No.9/2020 dated 22 April 2020 and those numbered 56 to 89 by Circular No.21/2020 dated 4 December 2020. Which circular the Tribunal meant has not been resolved and the answer has been cited here by its question number only. Separately, the proposition that the interest referable to a loan accepted as genuine in an earlier year should be allowed is at para 9 and is a quotation of the CIT(A)'s finding at his own para 8.7, not the Tribunal's holding; no locator has been taken from inside it. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The captioned appeals were allowed (para 14) and the Assessing Officer was directed to delete the impugned disallowances of interest for the captioned assessment years (para 13). The CIT(A) could not impute the surrender made under the 2020 Act and on that basis sustain a disallowance of interest which was not part of the settlement of the dispute under that Act (para 12). The loans had been accepted as genuine in the earlier assessment year and the settlement swept them in only because the whole amount had to be settled, so the settlement could not be treated as displacing that acceptance (para 10).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
My Vivad se Vishwas Form 1 was rejected because my CIT(A) appeal was filed late and the delay had still not been condoned on 31 January 2020. Was my appeal 'pending' for the 2020 scheme?
My Tribunal appeal was more than a year late and the delay was condoned only in February 2021, well after CBDT's 4 December 2020 circular. The designated authority says FAQ 59 therefore cannot help me. Is that right?
The designated authority rejected my Form 1 saying there was no disputed tax because my own return was accepted, so my appeal was incompetent. Can it go into whether my appeal was maintainable?
My Form 3 charges the higher search-case amount because the addition against me came out of a search on somebody else. Is mine a 'search case' under the 2020 scheme?